Will update this as thinking evolves - most recently updated Jan 18
- Keeping the share price stable over time
- Aligning share price with the currency in which raids are typically paid (clients rarely pay in ETH)
- Raiders paid in DAI don’t lose share buy-in power if ETH price increases during their raid
- Making consultation share buy-ins much simpler
1. Share dilution
As ETH prices goes up, minting new shares on a DAI peg would dilute shares purchased on an ETH peg.
One potential solution would be to establish a cutover date, and do a one-time share rebalancing based on the ETH:DAI price at that time (i.e. minting new shares with no tribute) so that subsequent shares purchased on the DAI peg would not dilute the old shares.
The math goes like this:
[ETH price at cutover date] is the price of ETH on the day we decide to make the conversion. As I write this in 1/18/21, ETH price is $1235.
DAI_share_price is the new target share price, e.g. 500
existing_shares_multiplier = [ETH price at cutover date] / DAI_share_price
For example, if today was the cutover date, all existing members would get multiple their existing shares by
2.47. I currently have 20 shares, so in this example, post-cutover date I should have 49.5 shares.
existing_shares_multiplier = $1235 / 500 = 2.47
2. Incentive to ragequit
An ETH price increase would create an increased incentive to ragequit, since the current share value will be temporarily higher than the targeted share value. The extreme version of this is a raider buying shares with 20% of their spoils and then immediately ragequitting those shares for a profit.
This issue is mitigated by the amount of ETH in the DAO bank. One potential solution would be to swap all our ETH for DAI, though that would limit the DAO’s financial upside. Another option is to swap enough ETH for DAI such that current share value = share price when only looking at the DAI balance, and then moving the ETH into a minion (non-ragequittable) dedicated to funding RIPs.
How to do it
If we decide to make this change, we then need to decide what currency the share price should be denominated in. Two options:
A. Shares price in DAI, i.e. new members tribute 500 DAI for 10 shares.
B. Share price ETH, i.e. new members tribute $500 worth of ETH
(B) has the advantage of maintaining RG’s economic alignment with Ethereum (including exposure to ETH upside), but also the downside of slightly more complicated share purchasing protocol, since any new share purchasing proposals will need to show their calculation work and be verified by voters.
Share distribution mechanism
We also need to decide how the new anti-dilution shares actually get created/distributed. Again, I see two options:
A. Personal responsibility. As discussed in roundtable, we treat this as an inactivity test. Each member needs to submit a proposal for more shares based on
existing_shares_multiplier. If they don’t, then that’s a clear signal that they are inactive. Individual responsibility to not get diluted.
B. Multi-summoner. We combine new share minting with the migration to xDAI. Scrap the existing xDAI DAO and redeploy with additional shares for each member according to